In encyclopedia episode 2 of the VON POLL IMMOBILIEN podcasts, Tim Wistokat, legal representative and head of the legal department at VON POLL IMMOBILIEN, and host Petra Konradi conduct an exciting interview on the significant topic of leasehold.

For whom and under what scenarios is leasehold rewarding? And which points should prospective clients definitely consider? You can listen to the amazing conversation about these and other topics here now straight or check out as a transcript in 'conventional manner'. We hope you enjoy it!

Podcast episode 'Erbbaurecht' - complete records

Moderator Petra Konradi:

You have already read it in the title - in this episode we clarify compactly and to the point the most essential questions on the topic of hereditary building rights. Because the arrive on which you build your home does not always have to come from you. The genetic structure right makes it possible to rent a plot of land and pay the owner in return an annual amount, the so-called ground rent.But even if land prices continue to rise ... Is it worth it for you? And if so, under what scenarios? What is in fact behind the heritable building right? And what should you pay attention to? We now clarify these concerns with Tim Wistokat. He is a lawyer and head of the legal department at VON POLL IMMOBILIEN.

My name is Petra Konradi, I am the host of the podcast. Welcome.

Tim Wistokat, attorney and head of the legal department at VON POLL IMMOBILIEN:

Hello Ms. Konradi, thank you extremely much for the invitation.

At very first glance, the heritable structure right appears to be an economical option to buying land. However, it is advisable to weigh both alternatives and to consider some mistakes.

Mr. Wistokat, constructing on someone else's land - how does that work?

Well, virtually speaking, it's extremely basic at initially. The grantor of the ground lease, i.e. the owner of the land, transfers to the leaseholder, i.e. the tenant of the land, a right to utilize the land in concern. The latter may then construct a residential or commercial property on it or purchase a residential or commercial property currently found on the land. Thus, the ground lease holder becomes the owner of the residential or commercial property, but not the owner of the land.

In return, the renter pays a sort of lease?
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Yes exactly, we are speaking about the annual ground lease. Previously, it was likewise called genetic lease, which is basically easily flexible in the quantity. As a guideline, however, the quantity of the ground lease is about 3 to 5% of the land value.

The unique feature and therefore also a point that need to be thought about thoroughly by the tenant: The ground lease can be adjusted every 3 years by the ground lease service provider.
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What else should prospective occupants think about?

In addition to the agreed payments, the parties ought to settle on upkeep and the possibility of making structural changes to the existing residential or commercial property.

In addition, it needs to be clarified ahead of time whether the residential or commercial property might be sublet by the leaseholder. In order to tape-record all arrangements in writing, the parties involved conclude a ground lease agreement and so that this is legally binding, it is notarized by the notary.

Followed by the registration of the ground lease in the land register of the residential or commercial property and furthermore in an independently established ground lease land register.

Can anyone provide a heritable structure right?

In principle, yes.

In concept, anyone can give a heritable building right. In practice, however, land is mostly rented by municipalities, churches, communities or business. Especially the church frequently appears in Germany as a lessor of land, so regarding allow young households with less equity to buy property or build a house.

The technique is typically in the information, even with hereditary structure rights?

Yes, I can validate that. As a rule, the term of the ground lease is in between 50 and 99 years. After the expiration of the ground lease, the ground lease expires and the residential or commercial property ends up being the residential or commercial property of the ground lease service provider. However, the latter need to then pay the leaseholder appropriate payment for the building and this is based upon the present market price.

Even in case of a sale or inheritance of the land or residential or commercial property, the hereditary building right does not end as a right of usage in rem. Rather, the new owner of the land or real estate takes control of the leasehold contract in addition to its remaining term. However, this does not suggest that the agreed term is automatically restored or extended. It is rather to be understood in the sense that a brand-new start of the term can be worked out with the brand-new owner. The more remaining term is left, the much better the opportunities are, of course, when the residential or commercial property is resold.

What is it about the so-called reversion?

If the leaseholder does not meet his contractual responsibilities or does not pay the lease for a minimum of two years, the proprietor can assert his right of reversion. In this so-called right of reversion, the leaseholder needs to return the ground lease to the landowner. The contract is ended prematurely and the ground lease service provider becomes the owner of the building. However, care should be taken here. In the occasion of a reversion, the ground lease owner must likewise compensate the leaseholder properly. Here, too, there is the possibility that the celebrations agree among themselves on an equally agreeable extension of the agreement.

In addition, although the ground lease grantor can approve the ground lease holder a right of first rejection on the residential or commercial property, the ground lease holder is not entitled to an agreement extension.

For whom is the ground lease worthwhile?

Tim Wistokat:

Who has little equity, however still does not wish to do without a home of their own, for which the heritable building right can be beneficial under particular situations, considering that only the purchase price for the house, however not for the land must be raised. In this case, the total quantity for genuine estate funding is naturally somewhat lower. Prospective buyers then pay in addition to the purchase rate for the residential or commercial property typically still the residential or commercial property tax, insurance coverage and upkeep expenses and the annual ground rent.

Petra Konradi:

To start with, the leasehold appears to be appealing for prospective purchasers with only little equity. But a closer look reveals some not insignificant issues. Probably the most significant downside: While the payment of a routine bank loan for a plot of land ends with time, the ground lease continues to run until completion of the contract. Especially in times of low rates of interest, conventional financing frequently proves to be more financially advantageous.

In addition, the ground lease can be adjusted every 3 years. Due to this, there is a possibility that the ground lease payments will go beyond the total land cost throughout the years. Although a regular realty purchase normally seems more costly in the acquisition, it typically shows to be less complex and less costly in the long run.

If you have any concerns about this or other topics, please do not hesitate to call our professionals or discover a lot more information on our site and in the VON POLL IMMOBILIEN - App. You can discover the links in the program notes of our podcast.

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